Question 1

If a company uses the FIFO cost flow method for its income tax return it must also use FIFO for financial reporting.

Accepted Answer

A) True 
 B)False

Question 2

Assuming that longer inventory holding periods act to increase expenses,which of the three companies would be expected to have the lowest inventory holding costs?

Accepted Answer

A) All three companies have equal holding costs 
B) Company X 
C) Company Y 
D) Company Z 
A) All three companies have equal holding costs 
B) Company X 
C) Company Y 
D) Company Z

Question 3

The inventory records for Radford Co.reflected the following:
  
-What is the amount of ending inventory assuming the FIFO cost flow method?

Accepted Answer

A) $480 
B) $440 
C) $400 
D) $940 
A) $480 
B) $440 
C) $400 
D) $940

Question 4

The cost flow method chosen by a company will impact its inventory turnover ratio.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following methods of applying the lower-of-cost-or-market rule will result in the fewest number of inventory write-downs?

Accepted Answer

A) Each individual inventory item 
B) Average of cost of goods sold for the past three years 
C) Major classes or categories of inventory 
D) The entire stock of inventory in the aggregate 
A) Each individual inventory item 
B) Average of cost of goods sold for the past three years 
C) Major classes or categories of inventory 
D) The entire stock of inventory in the aggregate

Question 6

What effect will an overstatement of ending inventory at the end of Year 1 have on the amounts reported on the Year 1 financial statements?

Accepted Answer

A) Overstatement of cost of goods sold 
B) Overstatement of total assets 
C) Understatement of net income 
D) Understatement of retained earnings 
A) Overstatement of cost of goods sold 
B) Overstatement of total assets 
C) Understatement of net income 
D) Understatement of retained earnings

Question 7

Phipps Corporation overstated its ending inventory on December 31,Year 1.Which of the following correctly identifies the effect of the error on Year 2 financial statements?

Accepted Answer

A) Cost of goods sold is overstated. 
B) Gross margin overstated. 
C) Ending inventory is understated. 
D) Net income is overstated. 
A) Cost of goods sold is overstated. 
B) Gross margin overstated. 
C) Ending inventory is understated. 
D) Net income is overstated.

Question 8

Barker Company paid cash to purchase two identical inventory items.The first purchase cost $18.00 cash and the second cost $20.00 cash.Barker sold one inventory item for $30.00 cash.Based on this information alone,without considering the effect of income taxes,which of the following statements is correct?

Accepted Answer

A) Cash flow from operating activities is $11.00 assuming the weighted-average inventory cost flow method is used. 
B) Cash flow from operating activities is $12.00 assuming the FIFO inventory cost flow method is used. 
C) Cash flow from operating activities is $10.00 assuming the LIFO inventory cost flow method is used. 
D) The amount of cash flow from operating activities is not affected by the inventory cost flow method chosen. 
A) Cash flow from operating activities is $11.00 assuming the weighted-average inventory cost flow method is used. 
B) Cash flow from operating activities is $12.00 assuming the FIFO inventory cost flow method is used. 
C) Cash flow from operating activities is $10.00 assuming the LIFO inventory cost flow method is used. 
D) The amount of cash flow from operating activities is not affected by the inventory cost flow method chosen.

Question 9

Taylor Co.had beginning inventory of $400 and ending inventory of $600.Taylor Co.had cost of goods sold amounting to $1,800.What is the amount of inventory that was purchased during the period?

Accepted Answer

A) $1,600 
B) $2,800 
C) $2,000 
D) $2,400 
A) $1,600 
B) $2,800 
C) $2,000 
D) $2,400

Question 10

The last-in,first-out cost flow method assigns the cost of the items purchased first to ending inventory.

Accepted Answer

A) True 
 B)False

Question 11

If the replacement cost of inventory is greater than its historical cost,the increase in value does not affect the company's financial statements.

Accepted Answer

A) True 
 B)False

Question 12

Glasgow Enterprises started the period with 80 units in beginning inventory that cost $7.50 each.During the period,the company purchased inventory items as follows:
   Glasgow sold 220 units after purchase 3 for $17.00 each.
-What is Glasgow's ending inventory under weighted-average (rounded)?

Accepted Answer

A) $2,361 
B) $2,340 
C) $1,980 
D) $1,998 
A) $2,361 
B) $2,340 
C) $1,980 
D) $1,998

Question 13

Which inventory costing method will produce an amount for cost of goods sold that is closest to current market value?

Accepted Answer

A) Weighted average 
B) Specific identification 
C) LIFO 
D) FIFO 
A) Weighted average 
B) Specific identification 
C) LIFO 
D) FIFO

Question 14

At a time of declining prices,which inventory cost flow method will result in the highest ending inventory?

Accepted Answer

A) Weighted-average 
B) FIFO 
C) LIFO 
D) Either weighted-average or FIFO 
A) Weighted-average 
B) FIFO 
C) LIFO 
D) Either weighted-average or FIFO

Question 15

Generally accepted accounting principles do not allow the cost flow pattern for merchandise inventory to differ from the physical flow of merchandise within the business.

Accepted Answer

A) True 
 B)False

Question 16

What happens when a company is operating in an inflationary environment?

Accepted Answer

A) The company's net income will be higher if it uses LIFO than if it uses FIFO. 
B) The company's cost of goods sold will be lower if it uses LIFO as opposed to FIFO. 
C) The company's net income will be the same regardless of whether LIFO or FIFO is used. 
D) The company's assets will be lower if it uses LIFO as opposed to FIFO cost flow. 
A) The company's net income will be higher if it uses LIFO than if it uses FIFO. 
B) The company's cost of goods sold will be lower if it uses LIFO as opposed to FIFO. 
C) The company's net income will be the same regardless of whether LIFO or FIFO is used. 
D) The company's assets will be lower if it uses LIFO as opposed to FIFO cost flow.

Question 17

Zinke Company understated its ending inventory at the end of Year 1.Which of the following correctly states the effect of the error on the amounts shown on the Year 1 financial statements?

Accepted Answer

A) Overstatement of total assets and cost of goods sold. 
B) Overstatement of cost of goods sold and retained earnings. 
C) Understatement of liabilities and retained earnings. 
D) Understatement of total assets and gross margin. 
A) Overstatement of total assets and cost of goods sold. 
B) Overstatement of cost of goods sold and retained earnings. 
C) Understatement of liabilities and retained earnings. 
D) Understatement of total assets and gross margin.

Question 18

The inventory records for Radford Co.reflected the following:
  
-What is the amount of cost of goods sold assuming the LIFO cost flow method?

Accepted Answer

A) $4,100 
B) $4,320 
C) $2,360 
D) $3,600 
A) $4,100 
B) $4,320 
C) $2,360 
D) $3,600

Question 19

What is meant by "market" in the lower-of-cost-or-market rule?

Accepted Answer

A) The amount of gross margin earned by selling merchandise. 
B) The amount the goods were sold for during the period. 
C) The amount that would have to be paid to replace the merchandise. 
D) The amount originally paid for the merchandise. 
A) The amount of gross margin earned by selling merchandise. 
B) The amount the goods were sold for during the period. 
C) The amount that would have to be paid to replace the merchandise. 
D) The amount originally paid for the merchandise.

Question 20

Which of the following statements is not correct regarding the importance of inventory turnover to a company's profitability?

Accepted Answer

A) Companies will prefer to have a low inventory turnover rather than a high inventory turnover. 
B) It is sometimes more desirable to sell a large amount of merchandise with a small amount of gross margin than a small amount of merchandise with a large amount of gross margin. 
C) A company's profitability is affected by how rapidly inventory sells. 
D) A company's profitability is affected by the spread between cost and selling price. 
A) Companies will prefer to have a low inventory turnover rather than a high inventory turnover. 
B) It is sometimes more desirable to sell a large amount of merchandise with a small amount of gross margin than a small amount of merchandise with a large amount of gross margin. 
C) A company's profitability is affected by how rapidly inventory sells. 
D) A company's profitability is affected by the spread between cost and selling price.

If a company uses the FIFO cost flow method for its income tax return it must also use FIFO for financial reporting.

Assuming that longer inventory holding periods act to increase expenses,which of the three companies would be expected to have the lowest inventory holding costs?

The inventory records for Radford Co.reflected the following: -What is the amount of ending inventory assuming the FIFO cost flow method?

The cost flow method chosen by a company will impact its inventory turnover ratio.

Which of the following methods of applying the lower-of-cost-or-market rule will result in the fewest number of inventory write-downs?

What effect will an overstatement of ending inventory at the end of Year 1 have on the amounts reported on the Year 1 financial statements?

Phipps Corporation overstated its ending inventory on December 31,Year 1.Which of the following correctly identifies the effect of the error on Year 2 financial statements?

Taylor Co.had beginning inventory of $400 and ending inventory of $600.Taylor Co.had cost of goods sold amounting to $1,800.What is the amount of inventory that was purchased during the period?

The last-in,first-out cost flow method assigns the cost of the items purchased first to ending inventory.

If the replacement cost of inventory is greater than its historical cost,the increase in value does not affect the company's financial statements.

Glasgow Enterprises started the period with 80 units in beginning inventory that cost $7.50 each.During the period,the company purchased inventory items as follows: Glasgow sold 220 units after purchase 3 for $17.00 each. -What is Glasgow's ending inventory under weighted-average (rounded)?

Which inventory costing method will produce an amount for cost of goods sold that is closest to current market value?

At a time of declining prices,which inventory cost flow method will result in the highest ending inventory?

Generally accepted accounting principles do not allow the cost flow pattern for merchandise inventory to differ from the physical flow of merchandise within the business.

What happens when a company is operating in an inflationary environment?

Zinke Company understated its ending inventory at the end of Year 1.Which of the following correctly states the effect of the error on the amounts shown on the Year 1 financial statements?

The inventory records for Radford Co.reflected the following: -What is the amount of cost of goods sold assuming the LIFO cost flow method?

What is meant by "market" in the lower-of-cost-or-market rule?

Which of the following statements is not correct regarding the importance of inventory turnover to a company's profitability?

An Introduction to Accounting

Accounting for Accruals and Deferrals

The Double-Entry Accounting System

Accounting for Merchandising Businesses

Internal Control and Accounting for Cash

Accounting for Receivables

Accounting for Long-Term Operational Assets

Accounting for Current Liabilities and Payroll

Accounting for Long-Term Debt

Proprietorships,partnerships,and Corporations

Statement of Cash Flows

Financial Statement Analysis

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Exam 5: Accounting for Inventories

If a company uses the FIFO cost flow method for its income tax return it must also use FIFO for financial reporting.

Assuming that longer inventory holding periods act to increase expenses,which of the three companies would be expected to have the lowest inventory holding costs?

The inventory records for Radford Co.reflected the following: -What is the amount of ending inventory assuming the FIFO cost flow method?

The cost flow method chosen by a company will impact its inventory turnover ratio.

Which of the following methods of applying the lower-of-cost-or-market rule will result in the fewest number of inventory write-downs?

What effect will an overstatement of ending inventory at the end of Year 1 have on the amounts reported on the Year 1 financial statements?

Phipps Corporation overstated its ending inventory on December 31,Year 1.Which of the following correctly identifies the effect of the error on Year 2 financial statements?

Taylor Co.had beginning inventory of $400 and ending inventory of $600.Taylor Co.had cost of goods sold amounting to $1,800.What is the amount of inventory that was purchased during the period?

The last-in,first-out cost flow method assigns the cost of the items purchased first to ending inventory.

If the replacement cost of inventory is greater than its historical cost,the increase in value does not affect the company's financial statements.

Glasgow Enterprises started the period with 80 units in beginning inventory that cost $7.50 each.During the period,the company purchased inventory items as follows: Glasgow sold 220 units after purchase 3 for $17.00 each. -What is Glasgow's ending inventory under weighted-average (rounded)?

Which inventory costing method will produce an amount for cost of goods sold that is closest to current market value?

At a time of declining prices,which inventory cost flow method will result in the highest ending inventory?

Generally accepted accounting principles do not allow the cost flow pattern for merchandise inventory to differ from the physical flow of merchandise within the business.

What happens when a company is operating in an inflationary environment?

Zinke Company understated its ending inventory at the end of Year 1.Which of the following correctly states the effect of the error on the amounts shown on the Year 1 financial statements?

The inventory records for Radford Co.reflected the following: -What is the amount of cost of goods sold assuming the LIFO cost flow method?

What is meant by "market" in the lower-of-cost-or-market rule?

Which of the following statements is not correct regarding the importance of inventory turnover to a company's profitability?

An Introduction to Accounting

Accounting for Accruals and Deferrals

The Double-Entry Accounting System

Accounting for Merchandising Businesses

Internal Control and Accounting for Cash

Accounting for Receivables

Accounting for Long-Term Operational Assets

Accounting for Current Liabilities and Payroll

Accounting for Long-Term Debt

Proprietorships,partnerships,and Corporations

Statement of Cash Flows

Financial Statement Analysis

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